Samsung Q3 net profit leaps almost half after Huawei boost
Samsung Electronics' net profit jumped by almost half in the 3rd quarter, it reported Thursday, as its mobile and chip businesses were boosted by US sanctions against its Chinese rival Huawei.
The world's biggest memory chip maker said profits in the July-to-September period were up 48.8 percent year-on-year to 9.36 trillion won ($8.3 billion), beating expectations according to Bloomberg News.
The firm may be the flagship subsidiary of the giant Samsung Group, by far the largest of the family-controlled conglomerates that dominate business in the world's 12th most significant economy, in fact it is essential to South Korea's monetary health.
The figures come a day following the burial of late chairman Lee Kun-hee -- who turned the firm into a global powerhouse -- and as the coronavirus wreaks havoc with the world economy.
But despite the pandemic hammering many economies, the South returned to growth in the third quarter, driven by a better-than-expected exports performance.
The country is currently widely expected to be among the least damaged among the OECD band of developed economies in 2020 when it comes to economic performance.
Analysts say Samsung's rollout in August of its latest premium smartphones -- the Galaxy Note 20 and the Galaxy Z Fold 2 -- in conjunction with strong sales of mid-range phones, led the firm's third-quarter performance.
A U.S. ban on foreign companies providing Huawei with U.S.-origin technology, which came into effect on Sept 15 -- cutting off essential supplies of semiconductors and software necessary for making smartphones and 5G equipment -- also provided a boost.
"Samsung has been quite aggressive in new launches along with channel strategies, riding on the ongoing anti-China sentiment," Prachir Singh, a senior analyst at market observer Counterpoint, told AFP.
A decrease in marketing costs because of the pandemic was "also helpful regarding operating profit" for Samsung, said Sujeong Lim, another analyst at Counterpoint.
The firm's memory business also benefited from the feud after Huawei rushed to stock up on Samsung-made semiconductors before the U.S. restrictions kicked in.
Its memory business "posted solid earnings as healthy demand for mobile and PC products resulted in higher-than-expected shipments, outweighing the impact of lower memory chip prices," the firm said in a statement.
Operating profit rose 58.7 percent to 12.35 trillion won, while sales were also up 8 percent at 66.96 trillion won.
Samsung may be the world's biggest manufacturer of memory chips and led the DRAM market with a 43.5-percent share in April-June, according to advertise researcher TrendForce.
Server DRAM chips enjoyed a boost as the pandemic prompted working at home and classes on the web -- but were now experiencing "significant oversupply", it said in a written report.
"Therefore, contract prices of server DRAM products continue steadily to descend to new lows," it continued, forecasting a 13-18 percent drop in the fourth quarter.
Lim at Counterpoint said: "The problem in the semiconductor market including servers market is probable not so good, thus there exists a large amount of uncertainty. Server demand can be decreasing."
Chairman Lee Kun-hee died on Sunday, six years after being left bedridden by a coronary attack, when his son and heir Lee Jae-yong took over as de facto leader, although officially he has remained vice-chairman.
Complicating the firm's succession plans, the son happens to be being retried over a sprawling corruption scandal that could see him go back to prison.
He is not being held in custody through the proceedings but a guilty verdict could deprive the firm of its top decision-maker.
Source: japantoday.com
